Earlier this week, I posted on the shock many Americans have felt recently when pulling up to the gas pump. Prices in some parts of the country are now over $2/gallon (California is closing in on $3/gallon). Analysts and other talking heads have attributed this rise to an array of causes, from reduced supplies due to aging refineries, to OPEC tightening it's output quotas, to the switch to cleaner-burning "summer" formulations.
But no matter who or what we blame, the price is still climbing and has been for nigh over a month now. Not surprisingly, this increase manifested itself in the Commerce Department's latest Consumer Price Index (CPI) figures. While "core" CPI (everything minus food and energy) ticked up only 0.2%, add both back into the mix, and overall CPI increased 0.5%. However, food prices declined slightly (0.1%) in January. Thus, the culprit was energy, which jumped 4.7%, the sub-index for gasoline up a whopping 8.1%.
While the February CPI report won't be released until next week, a quick check of the headlines, where it's clear even the media has picked up on the price spike, there's no reason to believe the upward trend will have abated.
That's why I was in fact quite surprised by this week's Retail Sales report.
One thing to remember about this Commerce Dept. report is that it doesn't record the number of sales, e.g. consumers bought a thousand more pairs of shoes this month; no, it tracks sales receipt figures, e.g., how much extra money was gained or lost by retailers, as a whole, and in various key areas. Thus, with sharp increases in prices in gasoline over the past couple of months, one would understandably expect to see a similar increase in the sales figures for gas stations. Not loss or profit, just the volume of actual sales.
Hence, my surprise when saw the actual retail sale figure for gas stations actually fell slightly (-0.1%) in February. The price increased, but obviously fewer Americans were filling their tanks. Consumers had reached the "tipping point", where the cost for an item, in this case gasoline, influenced their desire, or ability, to purchase said item.
Since the use of gasoline is so intertwined with daily life in America, the ramifications of this kind of consumer behavior can be huge. People decide going on vacation is too expensive, tourism falls, whole economies based on tourism, such as here in Maine, suffer. And it's clear that consumers are in fact getting more frustrated:
When Rotten Robbie dropped a few pennies to below the $2 mark earlier this week, Shontay Morgan of Union City turned her Mustang convertible around and zipped in for a tank.``I purposely gas up here,'' said the 29-year mortgage loan officer. ``Those people who go to Shell may have excess money to burn. I don't.
``These prices are crazy. We need gas control just like we have rent control.''
There's a theme here. Many motorists shopping at the discount station are outraged by the cost of fuel. Anger, skepticism and cuss words pour out.
When Ed Artega drove to Morgan Hill on Monday, his Nissan Maxima was running low on gas. He spotted a Shell station selling gas for $2.20 a gallon and said to heck with that. When he got back to Campbell and spotted the Rotten Robbie price, he turned into the station.
``I have one favorite swear word that I quit using when going to Catholic schools,'' said Artega, 54. ``Somebody is making a lot of money off this and we're getting screwed.''
The domino effect of higher gas prices impact far more than gas stations:
Some small businesses are worried that the increases will affect their profits. "I hate [gas prices] going up, and there's no end in sight," said Charles Holmes, owner of Edwin Holmes Florist in Fort Worth.Delivery prices at the floral shop start at $2, which Holmes said doesn't reap any profit.
"There's only so much someone is willing to pay for floral delivery," he said.
While the Bush Administration has yet to even address the brewing crisis, a few in Congress, including Maine's often clueless senator, Susan Collins, understand the import of the growing consumer angst. Collins and Michigan Democrat Carl Levin introduced legislation this week calling to temporarily suspend the purchase of oil for the Strategic Petroleum Reserve (SPR), hoping that doing such would reduce supply pressures pushing up prices. While the measure passed (barely) in the Senate (obviously, Collins catching-a-clue-itis hasn't spread to most of her Republican colleagues), it faces stiff opposition from House Republicans. Apparently, they, like Bush, don't understand that voters and consumers are more often than not, one and the same.
Posted by MB Williams at March 13, 2004 07:39 AM | TrackBackMB:
I welcome the arrival of the tipping point. I am unconvinced, however, that the appropriate response to the rising price of gasoline is legislative.
The appropriate response to rising gas prices, and the dependance on foreign oil that provides the impetus for war, is to stop driving gas guzzling SUVs.
The New Yorker recently published an article noting that we pay a premium when we buy the monstrosities; we've learned that in rollover accidents our passengers are more likely to be killed or suffer grave spinal injuries; and we pay $40-50 a tank every time we stop at the pumps. But still, on any day, urban roads are 3/4 packed with single passenger SUVs.
An SUV has its appropriate use (four passengers or more pulling a horse trailer). But soccer parents do not need to be driving the gas guzzling death traps back and forth to work and their kids' schools. Such useage is wasteful, irresponsble, and shortsighed.
Posted by: dog2 at March 13, 2004 08:59 AMMB,
In trying to understand the actions (as opposed to the words) of the Taliban wing of the Republican party, it is important to remember that their first loyalty is to the oil producers of this world, not the consumers. And current gas prices are not making oil producers unhappy, to say the least.
JC
Posted by: John Casey at March 13, 2004 10:22 AMKudos to the other Dog, and to you, Mary Beth, for raising this issue.
Simple answer: DO NOT under any circumstances (I mean that) use price controls, or other games to effect the price of oil; we have been subsidizing it to *&^^%ing long as it is (American national energy policy = air craft carriers), thereby crushing saner alternatives (forget even wind and solar-- THE SANEST MEASURE, OF COURSE, BEING SIMPLE CONSERVATION MEASURES using of the shelf technology and practices, all of which seem anathema to the American people).
Most of the world's low hanging fruit in the oil patch has long since been picked; we have to go deeper into jungles, deeper under oceans, deeper into perma-frost, to find new reserves of this stuff-- so... WHAT A SHOCK-- we have to go deeper into OUR POCKETS to pay for it!!! (Oh-- and the easy stuff all lies under political minefields in the Middle East...; indeed, very vulnerable-- half of Saudi oil exports runs through literally ONE pipeline junction).
The fact is, we have set up an entire unhealthy social structure (everything from exurban sprawl to inner city collapse, the decline of civic virtue, environmental degradation, high risk accidents) all BECAUSE OF CHEAP OIL. So OF COURSE we will hem, haw and bitch when the bedrock of that structure begins to come unhinged. Of course, it is entirely unsustainable (see above). No, we won't "run out of oil", but we sure as *&^% HAVE run out of "cheap oil".
What is un*&^%ing believable, is that this IS NO SURPRISE! We were treated to not one, but two oil crises in the '70's (I was 17 when they ended, but I sure as &^%$ remembered them), exacerbated until price controls were finally lifted-- but there would have been a problem anyway.
And sure, I understand the reaction of anger: we are in a crapper economy, and suddenly, people must shell out a lot more for a staple (without which they can't get to work, because we have structured their life so they live a million miles from work in an exurb somewhere, and we have usually done everything possible to make sure public transit is not available, or at least impractical).
But this is going to be an ongoing problem-- and maybe we can make oil "cheap" again-- but for a year here, a year there-- the oil price trend is upward, and in a big way. We can do it gradually, and people can adjust to it (i.e., let the market make this sort of jumps-- with short term inconveniences, but overall order), or we can go for market interferences, and when the ultimate fit hits the shan, turn it into a nation stopping crisis.
I'm ok with the main proposal: its trying to get the feds to STOP interfering in the market. And I'm ok with things like DIRECT INCOME SUBSIDIES to people to help pay for higher oil. But any other market interferences are just going to make this a whole lot worse when its all sorted out.
Posted by: the talking dog at March 13, 2004 10:29 AMI should probably clarify that it's not that I agree with the Collins/Levin approach - My own jury is still out on that one. I too think that expensive gas may lend itself to better solutions in the long run, though I hate the idea of taxing the poor (which is exactly what high energy prices do, on many different levels.) However, it's clear that Collins, Levin and a few others, mostly Dems, now understand that gas prices are in fact a serious issue, one which could lead to serious electoral consequences if not dealt with, in one way or another.
Posted by: MB at March 13, 2004 11:19 AMThe key to this issue is that the price of gas is probably headed up forever. The supply problems that are driving these prices are probably associated with worldwide production capacity limits. Oil production has been dropping in the USA for decades and is now dropping in several other oil producing states as well. As time goes on the huge fields in the mideast are being asked to supply a greater percentage of the worlds needs. Meanwhile the demand from emerging industrial countries like China and Brazil are causing the demand to soar. We are in a classic free market situation. The prices are going to go up and the competition for these increasingly scarce supplies are going to go up. I think we are only seeing the tiniest tip of the iceberg here.
Posted by: pamur at March 13, 2004 12:05 PMAs the demand for cheaper gas goes up...the chances that the US overthrows Chavez in Venezuela goes up.
Also...
Will things change in America? Will Kerry tear up the Patriot Act? Close down the Department of Homeland Security? This is what Kerry says on his website about Orange Alerts:
[“When the threat of terrorism is increasing I’ll do more than simply issue an Orange Alert. As President, I’ll make sure that towns and cities don’t have to bear all the burden of increasing security – a price tag that can weigh in at several million dollars a day. I will create an ‘Orange Alert Fund’ that pays for police overtime and other security enhancements,” -- John Kerry]
Police state anyone? Personally, I like the fake alerts much better.
Anyone but Bush = Better politician on the face of Empire
W.r.t. Venezueala, Andrew Buncombe writes in today's Independent something worth reading: $1M from the National Endowment for Democracy (US) to organize Chavez's opposition.
http://news.independent.co.uk/world/americas/story.jsp?story=500711
I've no idea what pol's face is on the game Empire, I stopped playing board games long, long ago, and now I'm limited to Uno, Go Fish, and long walks singing the Teletubbies theme song.
Posted by: Eric at March 13, 2004 05:44 PMWilliam Blum has done great work exposing the National Endowment for Democracy (NED).
Instead of directly funding the CIA to terrorize nations, the NED is used as a go-between.
Posted by: Rachel Mendoza at March 19, 2004 10:24 PM